Warren Buffet bought “Gold” for the first time. When Bitcoin?

[fillippone]

You have probably heard the news.
Warren Buffet bought gold, or rather something very similar to gold, for the first time in his history.

Warren Buffett traded Goldman Sachs for gold in Berkshire Hathaway’s newly revealed portfolio

Airlines weren’t the only stocks Warren Buffett soured on during the pandemic. In addition to selling all his airline holdings including Delta and Southwest, which Buffett announced in May, the Berkshire Hathaway investor also dumped his bank stocks, closing his position in Goldman Sachs completely.

Indeed, Buffett did far more selling than buying between April and June, as Berkshire’s quarterly shareholder filing, released Friday afternoon, made clear. As the coronavirus crisis escalated, the celebrated investor added just a single new stock to his Berkshire Hathaway portfolio: Barrick Gold, a Canada-based mining company whose stock price loosely trades in tandem with the price of gold—which has surged this year (up nearly 30%) as investors have sought safe havens. Barrick itself has outperformed the precious metal, with its shares up 45% so far in 2020. Buffett’s Barrick stock is currently worth about $565 million.

So he basically slashed his financial sectors exposure, to gain exposure to gold. Owning a gold mining company actually gives you exposure to price fluctuations of the underlying commodity, having the advantage, following the Omaha gospel, of providing a flow of dividends. Something similar to buying a refinery to get exposure to oil price appreciation.

Actually Buffet has always been really adverse to commodity investment, as he always thought a real enterprise, with the associated flow of money, constitutes an investment. So getting long commodity is not an investment.

From 2011 Berkshire Hathaway shareholders newsletter:



https://www.berkshirehathaway.com/letters/2011ltr.pdf

Just to put things in the right perspective the investment is not great, in Berkshire Hathaway parameters: they had  received over 3.7 Billion $ just in dividends from their top 10 companies (dividends from Apple and Wells Fargo topped more than 700 millions from each firm), compared to a GOLD investment of 563 USD million.
But we Have to remember Buffet is used to invest (and disinvest) in chunks. So we might see other investments in the coming quarters.

If you want to understand why Buffet decided to dump the industry the closest to the US Fiat shitcoin, while buying the industry closest to the real Store of Value, look at the following two graph:

	This graph should ring a few bells	SPX in Gold Tems	SPX deflated for the loss of value in USD

Well, I think it’ easy to recognise the first Graph on the left: it’s the SPX, the king, the biggest of all the indexes, the symbol for the US power.
On the other column instead there is the... SPX. Of course this time the unit of measure is different, and it is in the Gold value, the performance is less than astonishing.
In the third Column we see the SPX deflated for CPI, hence to tae into account the loss of purchasing power of the dollar in the last 20 Years, not negligible fact, as it is well above 40%.   

In other terms:

SPX	20y Yield	Annual Yield
Nominal	125%	4.15%
Gold-Deflated	-68%	-5.6%
CPI-Deflated	49%	2.03%

This is a smoking gun evidence on the fact the market is going up only because we shortened the meter used to measure it (the USD shitcoin), when it went nowhere when it was measured against the ultimate hard money: the gold.
I reiterate: Warren Buffet, for his own investment rules, couldn't buy gold directly, but bought the stock exposing his portfolio to Gold the most.

What it strikes to me is the timing.
In a few days we had three incredible news:

• Microstrategy, a Publicly listed company, bought more than 21,000 BTC as base asset reserve
• Grayscale investment had their biggest weekly inflows, with more than 217 USD millions of dollars subscribed in one week
• Warren Buffet buy a Gold mining Company, thinking the precious metal price dinamic will be able to provide him a good flow of dividends (this is an underplay off the situation, trying to minimise for intellectual honesty)

Having all these facts is a short span of time really make me think bitcoin is going trough a new evolutionary step in his history, a #Phase5, as PlanB use to call it.

[1715660702]

1715660702

[1715660702]

1715660702

[1715660702]

1715660702

[1715660702]

1715660702

[1715660702]

1715660702

[bitcoin_paypal]

Buffet is too old for crypto. If he want to just buy gold and not invest in btc then it his own right

[jackg]

Gold mining is a bit of a secure investment imo...

And you're not just investing in the gold, you're investing in the infrastructure which can be sold on if necessary or leased. Even if the price of gold falls, margins are still probably the same.

He probably won't be alive at a point where he'd choose to invest in bitcoin mining, and he probably already holds bitcoin(?) What stopped him holding $1 million worth and just keeping it parked? Berkshire aren't going to buy bitcoin anytime soon - in any meaningful amount I doubt bitcoin could absorb it.

This does actually mean though that Warren buffet has turned away from real estate and to gold - does he think new York Real Estate won't be growing for a while? Is he worried of another banking crisis? Most people say house prices should fall between 6 months and a year - perhaps this is his bet on that...

[cabron]

He isn't investing in BTC despite seeing the value of 1 BTC given to him by Sun had already climbed. Do you also think he is secretly investing BTC?

He isn't announcing he is investing BTC of course it will just prove him wrong. Announcing he is investing in BTC would make people go and buy BTC too resulting in to pump, he probably dont want that too because he also wants to accumulate.

[The Sceptical Chymist]

In a few days we had three incredible news:

• Microstrategy, a Publicly listed company, bought more than 21,000 BTC as base asset reserve
• Grayscale investment had their biggest weekly inflows, with more than millions of dollars subscribed in one week
• Warren Buffet buy a Gold mining Company, thinking the precious metal price dinamic will be able to provide him a good flow of dividends (this is an underplay off the situation, trying to minimise for intellectual honesty)

I hadn't read about Grayscale (but I'll check it out), but I was aware of MSTR's purchase of bitcoin, which I find to be very ballsy for a publicly-traded corporation to do.  Their stock was up a lot at yesterday's close, though I'm not sure that has anything to do with them buying bitcoin.

Warren Buffett certainly knows what he's doing, and the fact that he's ditching banks stocks has me thinking that something big is brewing, either in the banking sector in particular or the economy as a whole.  It's probably going to end up being both.  Buffett has also invested in metals before.  Some years ago he bought a bunch of physical silver if I'm not mistaken, and he made a tidy profit on it.  And if he's buying a single mining stock, it's likely not simply because he wants to invest in gold.  The business is probably an undervalued company that he's going to hold for the long-term.

This is some pretty interesting news, and it kind of reflects the crazy world we're living in right now.

Buffet is too old for crypto. If he want to just buy gold and not invest in btc then it his own right

It's not that he's too old.  Buffett is a very smart man and he just doesn't see it having any long-term value--plus his shareholders at Berkshire Hathaway would probably revolt if he did get into crypto. 

[hugeblack]

Perhaps regulatory restrictions are what prevents him from investing? Even if he buys, there is no need to show it to the public, he will not benefit anything and the price may increase by 1%, but the price will quickly correct.

I am against the rule of buying something because someone bought it or analysts expect it, follow your own style, analyze the news (not all of them are correct) and build your investment plan.

The economic recession may appear violent, or it is maneuvering to buy some shares at a cheaper price.

[Upgrade00]

Warren Buffett certainly knows what he's doing, and the fact that he's ditching banks stocks has me thinking that something big is brewing, either in the banking sector in particular or the economy as a whole.

I agree with this, whale investors usually take positions in or drop certain assets after some inside information or some market activity which would be reflected at a later time.
Warren Buffett usually is attracted to firms with positive net profit margin and a high asset turnover, he is also attracted to assets which returns dividends to shareholders, which Barrick Gold did earlier this year:

Toronto — Barrick Gold Corporation (NYSE:GOLD)(TSX:ABX) today announced that its Board of Directors has declared a dividend for the first quarter of 2020 of US $0.07 per share, payable on June 15, 2020, to shareholders of record at the close of business on May 29, 2020.
Source

On whether or not he owns bitcoins, it's possible without it being made public. Berkshire Hathaway has previously requested that some of their holdings not be made public by the SEC, without any public news, there can be no certainty.
He can also of course have a private wallet.

[ShowOff]

On whether or not he owns bitcoins, it's possible without it being made public. Berkshire Hathaway has previously requested that some of their holdings not be made public by the SEC, without any public news, there can be no certainty.
He can also of course have a private wallet.

Its still possible and we never know whats unpublished. People will probably track and try to find out what it is doing with bitcoin and of course the news circulating in the media may not be 100% true. I find it hard to believe that he will never try to invest in bitcoin, which today can still be said to be a very profitable investment asset. I think he know, but guessing that he own some bitcoin is also not the right thing.

[Mauser]

Indeed, Buffett did far more selling than buying between April and June, as Berkshire’s quarterly shareholder filing, released Friday afternoon, made clear. As the coronavirus crisis escalated, the celebrated investor added just a single new stock to his Berkshire Hathaway portfolio: Barrick Gold, a Canada-based mining company whose stock price loosely trades in tandem with the price of gold—which has surged this year (up nearly 30%) as investors have sought safe havens. Barrick itself has outperformed the precious metal, with its shares up 45% so far in 2020. Buffett’s Barrick stock is currently worth about $565 million.

I really like this trade into an actual mining company instead of buying gold outright. I actually only bought commodity index funds (mostly gold and silver) at the start for corona. I was a bit afraid equities would drop across the board. Dumping Airline stocks seemed like a no brainer - I think everyone sold them. But also selling Goldman Sachs stocks seems very conservative to me. Personally I am still holding some smaller European banks and probably won't sell them in the near future.

[oHnK]

Warren Buffet will never buy Bitcoin in the near future. The reason is Bitcoin is like gambling, no one knows the reasons for the ups and downs of Bitcoin prices for sure. Warren Buffett is one of those investors who thinks deeply about the fundamentals of his investments. Currently, Bitcoin still doesn't have clear fundamentals to be a very attractive investment for a Warren Buffet. If one day Bitcoin has clear fundamentals then im sure Warren Buffett will buy Bitcoin and be part of his investments.

[HeRetiK]

Typical Buffet move to invest in a gold mining company rather than gold itself. He's in the business of buying shares of value producing companies rather than rare commodities that are meant to be bought and hold. Also if everyone's digging for gold, what better move is there than to start selling shovels?

As far as Bitcoin is concerned, I doubt we'll ever see a move in this direction in Buffet's lifetime. First of all it's not his investment style (ie. it's a rare commodity rather than a company) and secondly he stated that he doesn't understand Bitcoin and is not willing to invest in something that he doesn't fully understand. Which I can only respect since honestly it is a kind of level headedness that is often missing in crypto.

[LoyceV]

Buffet is too old for crypto. If he want to just buy gold and not invest in btc then it his own right

It's not that he's too old.  Buffett is a very smart man and he just doesn't see it having any long-term value--plus his shareholders at Berkshire Hathaway would probably revolt if he did get into crypto.

Buffett has always said not to invest in things you don't understand. That's why he was very late investing in for instance Amazon.

The Bitcoin-equivalent of investing in gold mining would be investing in Bitcoin mining. I don't expect that to happen though, it's totally different. A gold mine and the company that owns it can expect long-term productivity, whereas a Bitcoin miner sees his hardware quickly become obsolete. It's much more of a continuous gamble on profitability than the stable flow of gold taken out of the ground. Then again, most of my knowledge comes from Gold Rush on the Discovery channel

[Coyster]

Having all these facts is a short span of time really make me think bitcoin is going trough a new evolutionary step in his history, a #Phase5, as PlanB use to call it.

Warren Buffet didn't invest in bitcoin, but a gold mining company (by extension Gold), but I get your point and how bicoin comes in, in all of these, after the Grayscale/MicroStrategy big news and how it was affiliated with bitcoin, one thing could be certain and it's that there's going to be a gradual movement from fiat to assets that can stand inflation and ward off devaluation.

That being said, talking about assets that can ward off inflation, Gold will come to mind first, but the next asset I'll think about is bitcoin, though it's still a long way before Bitcoin can be technically a safe haven, but it's in that phase to becoming that, bitcoin is doing good things this year, and this evolutionary step will continue and end up in bigger things.

[fillippone]

<...>
Warren Buffet didn't invest in bitcoin, but a gold mining company (by extension Gold), but I get your point and how bicoin comes in, in all of these, after the Grayscale/MicroStrategy big news and how it was affiliated with bitcoin, one thing could be certain and it's that there's going to be a gradual movement from fiat to assets that can stand inflation and ward off devaluation.

I think, as I understand Buffet investing, he invested in mining because it’s literally the industry most correlated with gold prices, not because of the mining per se. He said over the decades doesn’t consider commodities for his investment, as buying something and waiting for a price appreciation is not true investment. So he wanted a true business providing a steady dividend flow AND correlated with gold prices prices.

That being said, talking about assets that can ward off inflation, Gold will come to mind first, but the next asset I'll think about is bitcoin, though it's still a long way before Bitcoin can be technically a safe haven, but it's in that phase to becoming that, bitcoin is doing good things this year, and this evolutionary step will continue and end up in bigger things.

A few months ago, in the infamous Goldman Sachs presentation about bitcoin, they showed in case of “normal inflation” equities are a better hedge than gold. In this sense I think a bitcoin related equity (MicroStrategy is the only one I can think about right now!) are a better hedge, under Warren Buffet parameters he CURRENTLY use to invest.
Bitcoin mining is maybe the most competitive industry on planet Earth. I guess it’s not a good industry to invest into.

The point is: how long can Buffet ignore the true point,  and avoid buying bitcoin directly? When he will have to capitulate and accept the fact Bitcoin will be the new investment parameter?

[jackg]

The Bitcoin-equivalent of investing in gold mining would be investing in Bitcoin mining. I don't expect that to happen though, it's totally different. A gold mine and the company that owns it can expect long-term productivity, whereas a Bitcoin miner sees his hardware quickly become obsolete.

I think a lot of crypto mining firms are holidng onto a lot of their funds as well in hope that the price increases... You can generally get away without reading an electric metre for a copule of months-years here - I doubt it's much different anywhere else and it'd proabably make it more lucrative for them as they scale up to just wait on it.

... secondly he stated that he doesn't understand Bitcoin and is not willing to invest in something that he doesn't fully understand. Which I can only respect since honestly it is a kind of level headedness that is often missing in crypto.

Yeah most people get stuck learning about crypto so he probably thought he might've got stuck there too. I think there's an extremely high learning curve if you're not accustomed to science/computing before moving into crypto.

[pixie85]

Buffet is too old for crypto. If he want to just buy gold and not invest in btc then it his own right

It's not that he's too old.  Buffett is a very smart man and he just doesn't see it having any long-term value--plus his shareholders at Berkshire Hathaway would probably revolt if he did get into crypto. 

Maybe he sees its long term value but it's too long for him.

We will gradually move from paper to electronic money and possibly from there into more mainstream crypto but it's going to take many years before it happens and the future can be volatile. Buffett will be long gone by then. Old people prefer stability.

[2double0]

If Buffet is into buying mining companies and shares instead of the metals, why are we worried about him buying BTC? He can, instead, trade ETFs and make good money through it but you know he is Warren Buffet and someone sitting at such a high position will look for more liquidity to be able to redeem his profits while not dumping the markets (yes, he can dump the whole BTC market and still will not be in profits). I think he will take interest in BTC futures soon when the total crypto marketcap goes insane.

[suzanne5223]

Buffet is too old for crypto. If he want to just buy gold and not invest in btc then it his own right

It's not that he's too old.  Buffett is a very smart man and he just doesn't see it having any long-term value--plus his shareholders at Berkshire Hathaway would probably revolt if he did get into crypto. 

Maybe he sees its long term value but it's too long for him.

We will gradually move from paper to electronic money and possibly from there into more mainstream crypto but it's going to take many years before it happens and the future can be volatile. Buffett will be long gone by then. Old people prefer stability.

Old people prefer stability and mostly asset that they can held but been older was not the reason why Buffet didn't associate with cryptocurrency cause he's good business mind person and I also believe he didn't gets involve with crypto because of his shareholders as said by @The Pharmacist.
Meanwhile, with the stability in price and potentials of Gold is not possible for Buffet to just bought his first gold but this maybe his first public investment in gold.

[LogitechMouse]

Maybe he sees that the dollar value is slowly withering and we know that he is a type of man where he holds a lot of dollars and will just invest in a perfect time.

The reason I see why he bought is that he is hedging and possible that he sees the value of Gold. When it comes to Bitcoin, he can buy anytime he wants too but I don't think that he has interest in buying it. If he will not buy now or sometime in the future, he will regret it.. or not :X.

[AmoreJaz]

Maybe he sees that the dollar value is slowly withering and we know that he is a type of man where he holds a lot of dollars and will just invest in a perfect time.

The reason I see why he bought is that he is hedging and possible that he sees the value of Gold. When it comes to Bitcoin, he can buy anytime he wants too but I don't think that he has interest in buying it. If he will not buy now or sometime in the future, he will regret it.. or not :X.

who knows, he's privately securing bitcoin stash?  but with gold, thats a sure investment so it's really not surprising at all.  he can do all he wants with his riches, so wherever he invests it, he's free to do so. but if in case in the future, he will publicly mention when he invests in crypto, i guess people will go wild and it will have an impact on bitcoin's price. let's see...